Connie was offered a termination agreement – five work-free months with full pay. Tempting, but would accepting it really be a wise move? Here are three crucial things you need to know, before you put pen to paper.
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Unfortunately, it is not uncommon for employees to be offered to "reach an agreement" regarding the termination of their employment. Sometimes this is used as a way to bypass the seniority rules in the Employment Protection Act (Las) and retain more recently hired staff during layoffs.
This situation arose for Connie, who had previously been involved in recruiting several colleagues to her team. Now, she was offered to "reach an agreement on the termination of her employment."
Uncertain about how to handle it, she sought advice from her employment law advisors at trade union Unionen, where she's a member. The first question was:
"The basic rule of last in, first out still applies, right?"
"Yes, last in, first out still applies as a basic rule, although there are exceptions," explains Cadrie Rama, now an ombudsman and formerly one of the members' advisers at Unionen.
"Employers can make certain exceptions to seniority, and when there are collective agreements, they can also negotiate with the union about an agreement seniority list," she adds. "But sometimes, employers want to take a shortcut."
An agreement on the termination of employment can practically be one or several agreements, which, in some cases, may be advantageous for the individual concerned but often entails the opposite.
Most commonly, in such agreements, the notice period becomes work-free. Compensation then consists of continued salary payments until the final employment date without the requirement of performing work. Sometimes, one can also negotiate an extended, work-free notice period.
Some agreements may also include a lump sum known as a departure indemnity, a financial compensation more akin to the golden parachutes that executives sometimes receive. However, this is a less common solution.
Connie had been employed for five years with the same employer and thus had a three-month notice period, as per the law. Now, she was offered five months with full pay, without lifting a finger. It meant an extended, work-free notice period. But...
"When you agree to such a deal, what you are essentially doing is selling your employment. And an employment is almost always worth much more than a few months' salary," reminds Cadrie Rama.
Selling your employment means that the employer buys themselves out of their obligation to negotiate (according to Mbl) and the obligation to consider reassignment (§7 Las), i.e., the duty to investigate if, faced with a potential layoff, you could be assigned other tasks instead of being terminated.
If you enter into such an agreement, you won't be subject to the regular rules for seniority. It's also quite common to include in the agreement that you no longer have the right of first refusal for reemployment if the company starts hiring again.
An agreement can also mean that the employer is relieved of fulfilling their employer responsibilities regarding workplace safety and potential rehabilitation. Beyond your salary and all the benefits that provide job security, you may also have certain perks negotiated by you or your union.
Additionally, if you are not a Swedish citizen and your work permit is contingent on your employment, then you really have to think things through.
"Thus, you risk giving up quite a lot if you agree to such a deal," notes Cadrie Rama, who has many years of experience advising Unionen's members on law and employment-related matters.
Benefits are also a form of compensation; make sure it's stated in the termination agreement that you retain your agreed-upon benefits throughout the whole notice period.
If you are on a work-free period, ensure that a clause is included stating that your salary is non-deductible before signing.
Include in the termination agreement that any non-compete clause in your employment contract is lifted, preventing limitations on your next steps.
These three recommendations constitute the most crucial advice to consider before finalizing a termination agreement. However, the intricacies of such negotiations require comprehensive understanding. As soon as you become a member of Unionen you can call our expert advisors anytime for free.
As a member of Unionen, please ensure to review your income insurance in time. To be eligible for the complementary compensation from Unionen, you must have been a member for a minimum of twelve months. Read all about Unionen's income insurance protection here.
Another risk of agreeing to a termination agreement is that you might end up without income for quite a while if you don't immediately find a new job.
Depending on the reason for the agreement, you might be disqualified from unemployment benefits for a period, usually around 45 working days. If you haven't served the regular waiting period of two days before, they are now added before you can receive compensation.
The assessment varies from case to case and between different unemployment insurance funds, so it's essential to contact your fund to check the specifics in your case before agreeing to anything. The fund is also the basis for the supplementary income insurance that you as a member of Unionen would get.
So, there's a risk that you may have to manage without income for a rather long time after your work-free notice period is over, and you register as a job seeker with the Employment Agency.
Still, in certain individual cases, it might be the right path, according to Cadrie Rama.
"If an employee really doesn't want to keep their job with the employer and believes they can find another job fairly soon — or if they have well-advanced plans to start their own business, then it can be a good solution."
"But even then, there are some factors to consider. See three of the most important ones below."
"She realized she wasn't willing to trade her job security for what the employer was offering. What happened next, whether she negotiated different terms based on the advice she received, or if she's still in her employment, I don't know."
